The Central Bank of Nigeria (CBN) took a major step towards full exchange rate unification Tuesday after uploading the more market reflective NAFEX rate of N410.25 per US dollar on its website.
A full unification entails closing the gap between the now sole official rate and the parallel market rate.
Analysts expect the CBN to double down on reducing the gap between both rates, much to the benefit of an economy that has been starved of dollars and bereft of investor confidence.
The naira traded at N486 per USD in the parallel market Tuesday, according to data collated by Abokifx.
That implies a gap of N76 between the now official NAFEX rate and the parallel market rate.
The International Monetary Fund and the Presidential Economic Advisory Council hold the view that ditching the multiple exchange rate practice which Nigeria started in 2016 in reaction to lower oil prices will open up the economy to badly-needed investments.
Although the government had since March adopted the Investors and Exporters window rate (also known as the NAFEX rate) for government transactions, the CBN retained the old N379 per USD official rate on its website which created some confusion for investors.
The CBN pulled down the rate two weeks ago and has followed that action up by officially adopting the I&E window rate on its website where the naira is quoted at a weaker rate of N410.25 per USD.
The latest move leaves Nigeria with only two rates, the NAFEX rate and the parallel market rate.
That’s down from almost five different rates as at the beginning of 2020, which is proof of the progress Nigeria has made to ditch a multiple exchange rate practice that has distorted the market and frustrated foreign investors.